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Why Tom Preston Ignores Delta on Vertical Spreads
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ticker lesson
Breakdown
0:00lesson
Delta measures risk of options positions
- Delta measures risk of a position
- Delta of verticals is delta of one option minus delta of the other
- Delta ranges between 1 and 0 for calls, -1 and 0 for puts
2:19lesson
Delta of verticals is difference between options
- Delta of vertical is delta of one option minus delta of the other
- 335 345 call spread has delta 8.16
- Buying calls gives positive delta, selling gives negative delta
4:52lesson
Delta of verticals changes with time to expiration
- Delta of verticals changes with time to expiration
- 335 345 call spread delta increases from 8 to 34 as days to expiration decrease
- Delta is highest when stock is between strike prices
7:36lesson
Delta sensitivity increases near expiration
- Delta sensitivity increases as days to expiration decrease
- Delta of verticals is highest when stock is between strike prices
- Delta acts like more shares of stock as time passes
10:07lesson
Delta reflects risk exposure of verticals
- Delta reflects risk exposure of verticals
- Delta of verticals changes with stock price and time to expiration
- Delta is highest when stock is between strike prices
12:17lesson
Delta of verticals is dynamic and volatile
- Delta of verticals changes with volatility, stock price, and time to expiration
- Delta is not fixed and can change rapidly near expiration
- Defined risk remains, but delta sensitivity increases
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